Profits of War

The Fruits of the Permanent Military-Industrial
Complex

by William Hartung

Multinational Monitor, January/February
2005

U.S. weapons contractors have had their
ups and downs over the past 25 years, but they have done far better
than they should have. They have cashed in by pursuing a few simple
strategies: 1) exaggerating the threats faced by the United States;
2) marketing their weapons systems as the answer to national security
problems, regardless of their actual relevance to the needs of
the moment; and 3) exploiting well-cultivated relationships with
Pentagon officials, members of Congress, White House decision
makers and opinion shapers in the media and think tanks.

THE REAGAN REVOLUTION

in the mid-1970s, the industry and its
allies in the Pentagon, on Capitol Hill, and in organizations
like the rightwing Committee on the Present Danger (CPD), were
looking for ways to reverse the decline in military spending in
the wake of the Vietnam War.

The 1976 election of Jimmy Carter, who
campaigned on a platform of promoting human rights and curbing
the arms trade, got the industry's back up, prompting the creation
of a specific industry lobbying group, the American League for
Exports and Security Assistance (ALESA). ALESA was explicitly
designed to thwart Carter's efforts on this front.

The overthrow of the Shah of Iran by internal
opponents in late 1978 coupled with the Soviet invasion of Afghanistan
in 1979 gave political ammunition to hardliners within the Carter
administration, moving it to the right as it called for the development
of a Rapid Deployment Force capable of intervening militarily
in the Persian Gulf on short notice. Simultaneously, the CPD was
winning a propaganda war that claimed that the CIA had badly underestimated
Soviet military strength.

The arms industry was the direct beneficiary
of these developments, as it backed the CPD's preferred candidate,
Ronald Reagan, in his 1980 bid to oust Carter from the White House.

The industry as a whole cashed in, as
Reagan pursued the largest peacetime military buildup in U.S.
history, while specific companies got special favors. Rockwell
International was able to restore funding for the B-1 bomber,
combining White House support with a pork barrel campaign that
placed subcontracts for work on the plane in nearly every Congressional
district. Boeing benefited from the administration's all-out support
for a multi-billion sale of AWACS radar planes to Saudi Arabia,
while General Dynamics reaped the rewards from a relaxation of
the Carter administration's limits on sales of combat aircraft
to Latin America to squeeze in a sale of F-b fighters to Venezuela.

The weapons manufacturers ultimately over-reached
during the Reagan years, leading to several high-profile scandals.
These included the so-called "spare parts" scandal that
revealed charges of $600 for toilet seats and $3,000 for coffee
pots, which were in fact just the symbols of an entire procurement
system run amok.

There was also Operation Ill Wind, a massive
bid-rigging scheme in which former Pentagon officials conspired
with their colleagues inside the building to steer contracts and
subcontracts to favored companies while skimming off illegal fees
for themselves. Major firms implicated in Ill Wind included Boeing,
Hughes, General Dynamics and General Electric. Meanwhile, Lockheed
was caught rigging a major test for Reagan's beloved Star Wars
program.

And, in the most dangerous scandal of
all, a National Security Council staffer named Oliver North was
caught running an illegal gun-running operation out of the basement
of the Executive Office Building, using a network of front companies
and unsavory characters to override the will of Congress and subvert
the Constitution while arming the government of Iran and the anti-government
contra "rebels" in Nicaragua.

Even during the industry-friendly Reagan
era, the military-industrial complex was far from all-powerful.
A grassroots anti-nuclear movement campaign transformed Reagan
from the president who joked that "the bombing will start
in five minutes" to the first president to agree to deep
cuts in the U.S. nuclear arsenal. Reagan's pet project, the Star
Wars missile defense system, was unceremoniously thrown onto the
back burner in the face of a highly effective public campaign
waged by technical experts from groups like the Union of Concerned
Scientists that indicated that the system would be both destabilizing
and unworkable. The Ill Wind scandal led to reforms in weapons
procurement processes, while the exposure of the Iran/Contra scandal
at least briefly curbed the Executive Branch's appetite for covert
foreign adventures.

THE THREAT OF PEACE

The greatest threat to the revenues of
the arms industry came with the end of the Cold War and the collapse
of the Soviet empire.

General Cohn Powell, who served as chair
of the joint Chiefs of Staff in the administrations of George
Bush the elder and Bill Clinton, was perhaps a bit too forthcoming
when he noted that the U.S. was "running out of enemies."

The Pentagon and the Joint Chiefs eventually
settled on a strategy of selling the need for a capability to
wage two "major regional conflicts" against "rogue
states" like Iraq or North Korea simultaneously, and promptly
overstated the strength of these new priority adversaries. This
strategy helped limit cuts in military spending to levels far
less than would have otherwise obtained, stabilizing at Cold War
levels despite the lack of a superpower adversary.

In parallel with the Pentagon's efforts
at creating new threats, the arms industry was doing its part
to' keep spending as high as possible, in part by funding right-wing
think tanks like Frank Gaffney's Center for Security Policy, a
full-time media megaphone for reviving Star Wars and restoring
Reagan-era military budgets.

Individual companies also engaged in efforts
to re-position existing programs for the new era. For example,
Lockheed produced a brochure for its F-22 fighter plane, which
had originally been designed to do battle with a next-generation
Soviet combat aircraft that no longer existed, arguing that its
new rationale was to fight the "blue-gray threat." By
this, the company meant the growing proliferation of advanced
U.S. or European-origin fighter planes and anti-aircraft systems
sold to countries that were currently either neutral towards the
United States or active U.S. allies. The argument went that if
any of these nations turned against the United States, the country
needed to have better fighter planes than they had. And since
the United States had already sold them its best aircraft, it
followed that it was imperative to build the next generation fighter
jet, the F-22. In short, as the cartoon character Pogo used to
say, "we have met the enemy, and it is us!"

The arms lobby also sought to bolster
its profitability in the immediate post-Cold War years by boosting
foreign sales, such as the $6 billion sale of 150 F-16s to Taiwan
and the $9 billion sale of 72 McDonnell Douglas F-15s to Saudi
Arabia that were brokered during the stretch run of the 1992 presidential
election. George H.W. Bush appeared to announce the F-16 deal
at the General Dynamics plant in Fort Worth, Texas in front of
a crowd of cheering workers with signs that said "Thank you
President Bush for saving our jobs." He held a similar rally
in St. Louis, Missouri at the F-15 factory. The F-15 sale was
helped along by a heavy industry lobbying campaign that included
distribution of a video entitled "F- 15s for Saudi Arabia
- Made in America" which made it look like the entire industrial
Midwest would go down the tubes if the deal wasn't allowed to
go through.

Other major industry victories during
the Clinton years included a revival of spending and serious testing
of the missile defense program, which grew to be a $5 billion
per year enterprise with the support of members such as Representative
Curt Weldon, R-Pennsylvania, a member of the advisory board of
the Center for Security Policy with a Boeing plant in his district.
The progress of "Star Wars II" was helped along by the
findings of the Rumsfeld Commission, another classic exercise
in threat exaggeration headed up by former Ford (and future George
W. Bush) Secretary of Defense Donald Rumsfeld.

Perhaps the industry's slickest move of
all was the "payoffs for layoffs" plan, in which then-Martin
Marietta chief Norman Augustine persuaded Pentagon officials William
Perry and John Deutsch to get the government to pick up part of
the tab for arms industry mergers. The idea was for taxpayers
to pay to promote consolidation in the industry, in the wake of
post-Cold War reductions in military spending. This approach helped
spur mergers of Lockheed and Martin Marietta, Northrop and Grumman,
Boeing and McDonnell Douglas, and numerous other combinations
large and small. Eyebrows were raised by the fact that both Perry
and Deutsch had worked as paid consultants for Augustine's firm
before joining the Pentagon.

THE BUSH II YEARS

Having weathered the post-Cold War period
with their profitability intact, the major weapons contractors
hit the jackpot with the presidency of George W. Bush. Well before
September 11 cleared the way for major increases in military and
homeland security spending, the industry had already placed its
bets on Bush, giving him five times as much in donations in the
2000 presidential race as it gave to his opponent Al Gore. Military
spending proper has risen from just over $300 billion per year
when Bush took office to over $439 billion per year in the proposed
fiscal year 2006 budget, not to mention the $200 billion and counting
in emergency appropriations approved for the wars in Iraq and
Afghanistan. The emphasis on homeland security has created a whole
new pot of money for the companies to pursue, which has more than
doubled to over $40 billion per year in the Bush years.

The Big Three contractors Lockheed Martin,
Boeing and Northrop Grumman - combined to split nearly $50 billion
in Pentagon contracts in fiscal year 2004, or nearly one out of
every four dollars the Pentagon handed out for everything from
rifles to rockets. By comparison, the top three contractors in
the late 1970s accounted for roughly 13 percent of Pentagon contracts,
roughly half the share of the current Big Three.

A new breed of contractors - private military
firms like Halliburton, Dyncorp, Blackwater and CACI - has emerged
with a vengeance to supply everything from meals to base and vehicle
maintenance, from security services to training in overseas combat
zones. Brookings Institution expert Peter W. Singer notes that
reliance on these firms has mushroomed in the last decade. In
the 1990/1991 Iraq war, one in 100 personnel in theater worked
for a private firm, while in the current Iraq war that figure
is one in 10.

The Bush buildup has spawned its own scandals,
including a corrupt deal to lease Boeing 767s and convert them
to aerial refueling tankers that has so far led to the resignation
of the company's CEO and left another official in jail; a slew
of billing scandals, cost overruns and allegations of fraud by
Vice President Cheney's former firm, Halliburton, in Iraq; and
even the involvement of two private firms, Titan and CACI, in
the Abu Ghraib torture scandal in Iraq. These high profile scandals
don't represent a few bad apples, but a whole barrel that has
become rotten from lack of public oversight and accountability.

Nongovernmental organizations in the anti-war
and government accountability movements are beginning to work
with members of Congress on everything from tightening the "revolving
door" that allows arms industry officials to move effortlessly
between corporate posts and policymaking jobs in government, to
the creation of a new Truman-style commission on war profiteering.

As President Eisenhower noted in his military-industrialcomplex
speech over four decades ago, only an "alert and knowledgeable
citizenry" can keep the arms lobby under control. We are
overdue for a new wave of reform. Our security is too important
to be left to the whims of special interests.

William Hartung is the director of the
Arms Trade Resources Center at the World Policy Institute, at
the New School for Social Research in New York City.